Petrol prices may fall Rs 2 on December 1

NEW DELHI: Petrol prices are expected to fall more than Rs 2 a litre from Thursday, the second successive cut in two weeks, as benchmark Singapore gasoline margins dipped after the last fortnightly review, oil company executives said on Monday.

At the current price level, state oil firms will earn an average margin of $8 a barrel on the fuel, up from $5.74 in mid-November, building the case for a price cut at the next fortnightly review of prices on December

1. Executives in Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum said the extent of the price cut would depend on the average international rates and the exchange rate at the end of the fortnight on November 30. Brent crude oil prices rose $3 on Monday to $109.40 per barrel, but domestic petrol price is pegged to the international gasoline prices, which often move in tandem with crude oil, but not always.

One official said the oil companies may decide on a smaller cut in prices to make up for past losses, but the oil ministry is keen to adopt a transparent system of petrol prices based on international rates. The previous fortnight ended November 15 saw petrol price in Delhi cut by Rs 2.22 a litre. Executives say the entire gain of petrol prices could not be passed on to the consumer because of the rupee depreciation.

"Our currency has further weakened and this would offset some of the gains," one executive said requesting anonymity. The average exchange rate for this quarter so far is Rs 51.73 for one dollar against Rs 49.32 last fortnight.

A senior oil ministry official said the oil companies have committed to revise petrol prices on the basis of Singapore FOB rates every fortnight and fix pump prices for the next fortnight, accordingly, as reported first by ET on November 17. Pricing decisions have often been influenced by political considerations of the ruling party, and oil companies would not cut prices to make up for past losses. Petrol prices moved north for 16 consecutive months since deregulation in June last year.

The first downward revision was on November 16 when prices were cut by Rs 2.22 a litre in Delhi, reversing the November 4 price hike, following stiff resistance by all political parties including ruling Congress and its allies. State oil firms suffered an estimated revenue loss of over Rs 130,000 crore on selling diesel, kerosene and cooking gas below market rates in 2011-12.

IOC, BPCL and HPCL have slipped into red with over Rs 23,400-crore net loss in the first half of the current financial year. Oil companies are also seeking a rise in diesel, kerosene and cooking gas prices, which are controlled by the government, but political considerations such as assembly elections in key states like Uttar Pradesh have hampered the move.

Oil minister S Jaipal Reddy had met finance minister Pranab Mukherjee on November 2 and asked him to convene a meeting of the empowered group of ministers on fuel prices but the meeting has not been called so far.